Lemon socialism is a pejorative term for a form of

government intervention A market intervention is a policy or measure that modifies or interferes with a market, typically done in the form of state action, but also by philanthropic and political-action groups. Market interventions can be done for a number of reas ...

in which government

subsidies A subsidy, subvention or government incentive is a type of government expenditure for individuals and households, as well as businesses with the aim of stabilizing the economy. It ensures that individuals and households are viable by having acce ...

go to weak or failing firms (''lemons''; see

Lemon law Lemon laws are laws that provide a remedy for purchasers of cars and other consumer goods in order to compensate for products that repeatedly fail to meet standards of quality and performance. Although many types of products can be defective, the ...

), with the effective result that the

government A government is the system or group of people governing an organized community, generally a State (polity), state. In the case of its broad associative definition, government normally consists of legislature, executive (government), execu ...

(and thus the

taxpayer A taxpayer is a person or organization (such as a company) subject to pay a tax. Modern taxpayers may have an identification number, a reference number issued by a government to citizens or firms. The term "taxpayer" generally characterizes o ...

) absorbs part or all of the recipient's losses. The term derives from the conception that in

socialism Socialism is an economic ideology, economic and political philosophy encompassing diverse Economic system, economic and social systems characterised by social ownership of the means of production, as opposed to private ownership. It describes ...

the government may nationalize a company in its entirety, while in lemon socialism the company is allowed to keep its profits but its losses are shifted to the taxpayer. As ersatz capitalism, it may also refer to

Joseph Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, political activist, and a professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2 ...

's assessment of neo-liberalism, cartelization and rent-seeking in the American economy, "run for and by the powerful". Such payments may be made with the intent of preventing further, systemic damage to what might otherwise be considered a free marketplace. For example, the

bailout A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy. A bailout differs from the term ''bail-in'' (coined in 2010) under which the bondholders or depositors of global syst ...

that followed the

2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...

may be described as lemon socialism. The pejorative arises from the belief among

free market In economics, a free market is an economic market (economics), system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of ...

economists that in a functional free market, failing companies would be replaced by better functioning companies in response to market demand. The term may also be used to describe government efforts to

nationalize Nationalization (nationalisation in British English) is the process of transforming privately owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization contrasts with priv ...

companies or industries, in which the government takes over failing companies without taking over healthy companies. ("Critics fear that a rush to public ownership may bring a form of 'lemon socialism'—where the government, as in England, takes over failing companies, but not healthy ones.") Advocates of free markets may then point to the faltering, nationalized enterprises as examples of how government regulation hurts business.

Origin

Mark Green coined the phrase in a 1974 article discussing the

utility company A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and r ...

Con Ed. The sentiment was earlier expressed in the adage " socialism for the rich and capitalism for the poor", which was in use by the 1960s, though the notion of privatizing profits and socializing losses dates at least to 1834 and

Andrew Jackson Andrew Jackson (March 15, 1767 – June 8, 1845) was the seventh president of the United States from 1829 to 1837. Before Presidency of Andrew Jackson, his presidency, he rose to fame as a general in the U.S. Army and served in both houses ...

's closing of the

Second Bank of the United States The Second Bank of the United States was the second federally authorized Second Report on Public Credit, Hamiltonian national bank in the United States. Located in Philadelphia, Pennsylvania, the bank was chartered from February 1816 to January ...

used the term ''ersatz capitalism'' to describe a similar approach by

Barack Obama Barack Hussein Obama II (born August 4, 1961) is an American politician who was the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, he was the first African American president in American history. O ...

Other languages

In Icelandic, lemon socialism is known as ''Sósíalismi andskotans'', meaning "the devil's socialism", a term coined by Vilmundur Jónsson (1889–1971, Iceland's Surgeon General) in the 1930s to criticize alleged

crony capitalism Crony capitalism, sometimes also called simply cronyism, is a pejorative term used in political discourse to describe a situation in which businesses profit from a close relationship with state power, either through an anti-competitive regul ...

in Landsbanki, which gained renewed currency in the debate over the 2008–2012 Icelandic financial crisis. Lemon socialism, or more precisely crony capitalism, is also referred to as Pilsfaldakapítalismi, meaning "skirt capitalism", ''pilsfaldur'' being the hemline of the skirt; and the term referring to children hiding behind their mothers' skirts after having done something wrong to criticize the alleged lack of transparency in dealings and reluctance to deal with bad consequences by themselves.

References

{{reflist Capitalism Socialism Metaphors referring to food and drink Political corruption Subsidies Political pejoratives

Origin

Other languages

See also

References